Using the table of probabilities and returns for a stock mutual fund, what is the mutual...

Using the table of probabilities and returns for a stock mutual fund, what is the mutual fund's expected return?

State	Probability	Return
Depression	0.05	-20%
Recession	0.25	-5%
Normal	0.5	8%
Boom	0.2	30%

Multiple Choice

9.15%
10.25%
7.75%
8.00%

Solutions

Expert Solution

Expected return=Respective return*Respective probability

=(0.05*-20)+(0.25*-5)+(0.5*8)+(0.2*30)

which is equal to

=7.75%

jeff jeffy answered 1 year ago

Next > < Previous

Related Solutions

The stock has the following returns and probabilities of those returns. What is the expected return...

The stock has the following returns and probabilities of those returns. What is the expected return and risk of the stock using the data? Use your knowledge (weighted average of returns to calculate expected return and standard deviation of returns to calculate risk). return probability 6% 70% 15% 30% Also, How do you calculate portfolio beta? I have this problem and have not been able to calculate the correct answer. Using the table below what is the beta of the...

You are operating a mutual fund which today has $100mil in assets. Your returns and fund...

You are operating a mutual fund which today has $100mil in assets. Your returns and fund flows into/out of the fund are listed below. Time = Return Fund Flow $Mil 1 20.00% 5 2 10.00% 3 3 -30.00% -10 4 10.00% 4 5 -5.00% -2 Question 1: What is the arithmetic average (mean) of the returns? Question 2: What is the geometric average (mean) of the returns? Question 3: What is the dollar-weighted average (mean) of the returns?

Discuss the Mutual Fund Industry and their role in the stock market.

A pension fund manager is considering three mutual funds. The first is a stock fund,...

A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a long-term government and corporate bond fund, and the third is a T-bill money market fund that yields a sure rate of 5.5%. The stock fund has an expected return of 15% and a standard deviation of 23%. The bond fund has an expected return of 9% and a standard deviation of 23%. The correlation between the fund returns is.15. a) What...

A pension fund manager is considering three mutual funds. The first is a stock fund, the...

A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a long-term government and corporate bond fund, and the third is a T-bill money market fund that yields a sure rate of 5.5%. The probability distributions of the risky funds are: Expected Return Standard Deviation Stock fund (S) 16% 45% Bond fund (B) 7% 39% The correlation between the fund returns is 0.0385. What is the expected return and standard deviation for...

A pension fund manager is considering three mutual funds. The first is a stock fund, the...

A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a long-term government and corporate bond fund, and the third is a T-bill money market fund that yields a sure rate of 5.5%. The probability distributions of the risky funds are: Expected Return Standard Deviation Stock fund (S) 16% 45% Bond fund (B) 7% 39% The correlation between the fund returns is 0.0385. What is the expected return and standard deviation for...

A pension fund manager is considering three mutual funds. The first is a stock fund, the...

A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a long-term government and corporate bond fund, and the third is a T-bill money market fund that yields a sure rate of 4.7%. The probability distributions of the risky funds are: Expected Return Standard Deviation Stock fund (S) 17% 37% Bond fund (B) 8% 31% The correlation between the fund returns is 0.1065. What is the Sharpe ratio of the best feasible...

A pension fund manager is considering three mutual funds. The first is a stock fund, the...

A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a long-term government and corporate bond fund, and the third is a T-bill money market fund that yields a rate of 8%. The probability distribution of the risky funds is as follows: Expected Return Standard Deviation Stock fund (S) 17 % 30 % Bond fund (B) 11 22 The correlation between the fund returns is 0.10. a-1. What are the investment proportions...

A pension fund manager is considering three mutual funds. The first is a stock fund, the...

A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a long-term government and corporate bond fund, and the third is a T-bill money market fund that yields a sure rate of 5.8%. The probability distributions of the risky funds are: Expected Return Standard Deviation Stock fund (S) 19% 48% Bond fund (B) 9% 42% The correlation between the fund returns is 0.0762. What is the Sharpe ratio of the best feasible...

A pension fund manager is considering three mutual funds. The first is a stock fund, the...

A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a long-term government and corporate bond fund, and the third is a T-bill money market fund that yields a sure rate of 5.5%. The probability distributions of the risky funds are:Expected ReturnStandard DeviationStock fund (S)15%32%Bond fund (B)9%23%The correlation between the fund returns is .15 What is the expected return and standard deviation for the minimum-variance portfolio of the two risky funds? (Do not...

Subjects